1. Check Your Withholdings 

The tax reform laws that were implemented for 2018 caused the automatic withholdings on most people’s paychecks to drop. While this likely meant larger paychecks for you throughout the year, it will also impact your taxes. If you’re used to receiving or owing roughly the same amount every year, this will most likely change due to your decreased withholdings; you’ll be refunded less than normal, or you may owe more than you usually do. In some cases, those who typically received a refund may end up owing. 

Now is a good time to review your withholdings and compare them to last year, so you aren’t surprised by the change in your tax situation this year. The IRS also has a tool to help you calculate if you’re withholding the proper amount from your paychecks. Use their Paycheck Checkup calculator to find out how much you should withhold from each paycheck; if you need to make adjustments, file a new Form W-4 with your employer. 

2. Get an Estimate of Your Tax Liability or Refund 

Even if you’re not ready to file just yet, the IRS recommends calculating what your tax liability or refund will be now, so that you can properly prepare for it when you file. The tax reform will likely impact refunds and tax bills significantly, so even a rough estimate can help you to get funds in order to handle a larger tax liability, if necessary. 

You should also be aware that anyone claiming the Earned Income Credit or the Additional Child Tax Credit will have their refunds delayed at least until the middle of February. And, with the government shutdown delaying the IRS’s tax season, those delays could last much longer. 

3. Renew Your ITIN If Needed 

Certain nonresident aliens, resident aliens, and dependents or spouses are assigned an individual taxpayer identification number (ITIN) in place of a Social Security number. Your ITIN plays the same role as an SSN on your tax return; however, unlike an SSN, an ITIN expires. So, if you have an ITIN that might expire before you’re able to file your return, you should submit a renewal application now to avoid any potential complications with the IRS. 

4. Look into New Tax Forms 

The tax reform laws have also updated some fairly common tax forms. For example, Form 1040 has been updated and shortened to more closely resemble Forms 1040-EZ and 1040A. However, it also now requires additional schedules to attach in certain circumstances. Take a little time to check out the shortened Form 1040 and familiarize yourself with it. This will help you to get a head start and make it less confusing once you’re ready to file. 

5. Know Your Resources for Help 

Even the IRS is aware that this tax year is going to be more complicated than usual, and there’s bound to be a lot more confusion. However, there are many resources that you can turn to for assistance, including online resources through the IRS website, and the Volunteer Income Tax Assistance program. Do some research and find where you can turn for help when you have questions. 

Our team of experienced CPAs is always available to offer you tax help in Provo and answer any questions you might have regarding the reformed tax law, or to assist you with filing your taxes. Contact us today to set up an appointment.

Trumps tax reforms will not be in affect for the 2017 tax year; they will only be applied to future tax returns. If you have questions about how these changes will impact on your tax returns in the future, please speak to one of our certified public accountants in Provo. 

Standard Deductions 

Under the old law, standard deduction amounts for 2018 would have been: $6,500 for single individuals or married individuals filing separately, $9,550 for heads of household, and $13,000 for married individuals filing jointly. 

With the new changes to the tax law, the standard deductions for 2018 through 2025 will be as follows: $24,000 for married individuals filing jointly, $18,000 for heads of household, and $12,000 for all other tax payers. This will be adjusted for inflation after 2018. 

Personal Exemptions 

Through 2017, taxable income was calculated by subtracting personal exemption deductions from a taxpayer’s adjusted gross income. Exemptions were typically permitted for the taxpayer, as well as their spouse and any dependents. Under the old tax law, the scheduled amount that could be exempted was to be $4,150 per individual on the return. 

Beginning January 1, 2018, deductions for personal exemptions have been suspended by reducing the permitted exemption amount to zero. 

State and Local Tax Deductions 

Under pre-Act law, taxpayers were able to deduct all state, personal, real estate, and sales tax as deductions on their federal returns, with no cap. 

Beginning in 2018, taxpayers may only claim up to $10,000 in state and local tax deductions. 

Mortgage and Home Equity Interest Deductions 

In 2017 and prior tax years, taxpayers could include mortgage or home equity interest on a primary or qualified secondary residence as an itemized tax deduction. This applied to mortgage loans with up to $1 million in debt, or $500,000 in debt for a married individual filing a separate return; as well as home equity debts of up to $100,000. 

For tax years 2018 through 2025, interest on home equity debts no longer qualify for a deduction. Deductions for mortgage interest are limited to an underlying debt of up to $750,000 or $375,000 for married individuals filing separately. The lower limits do not apply to mortgages or home equity loans acquired prior to December 15, 2017. After 2025, the previous $1 million/$500,000 limitations will be restored, regardless of when the mortgage or home equity debt was acquired. 

Medical Expense Deductions 

Deductions are permitted for medical expenses paid during the tax year, so long as those expenses were not reimbursed by insurance. These medical expenses could be for the taxpayer, their spouse, and/or any of their dependents. Prior to the tax reform, all medical expenses exceeding 10% of the taxpayer’s adjusted gross income were deductible as itemized deductions. This threshold was lowered to 7.5% of the taxpayer’s income if the taxpayer or their spouse reached age 65 before the end of the tax year. 

Under the new tax law, for the 2017 and 2018 tax year, the threshold for medical expense deductions is reduced to 7.5% of income for all taxpayers. 

Miscellaneous Itemized Deductions 

Under pre-Act law, taxpayers could deduct certain miscellaneous itemized deductions, so long as those deductions exceeded, in total, more than 2% of the taxpayer’s income. 

For tax years 2018 through 2025, miscellaneous itemized deductions are suspended altogether. 

Again, note that these laws do not affect your current tax filings. However, if you have questions regarding these tax law changes or your current tax return, please reach out to us to speak to one of our certified public accountants in Provo.